The adeno-associated virus 2 (AAV) vectors have gained attention as an alternative to the more commonly used retrovirus- and adenovirus-based vectors. Recombinant AAV vectors have been shown to target the liver efficiently, but the transgene expression is restricted to approximately 5% of the hepatocytes. Because the viral genome is a single-stranded DNA, and single strands of both polarities are encapsidated with equal frequency, it has been suggested that failure to undergo DNA strand-annealing accounts for the lack of efficient transgene expression. Others and we, on the other hand, have proposed that failure to undergo viral second-strand DNA synthesis contributes to the observed low efficiency of transgene expression. We have previously documented that a cellular protein, designated FKBP52, inhibits AAV second-strand DNA synthesis, when present in phosphorylated forms, and consequently, limits transgene expression in non-hepatic cells, whereas unphosphorylated forms of FKBP52 have no effect. To further evaluate whether phosphorylated FKBP52 is also involved in regulating AAV-mediated transgene expression in murine hepatocytes, we generated transgenic mice over-expressing the cellular T cell protein tyrosine phosphatase (TC-PTP) protein, known to catalyze dephosphorylation of FKBP52, as well as mice deficient in FKBP52. We have demonstrated that dephosphorylation of FKBP52 in TC-PTP transgenic (TC-PTP-TG) mice, and removal of FKBP52 in FKBP52-knockout (FKBP52-KO) mice, results in efficient transduction of murine hepatocytes following tail-vein injection of recombinant AAV vectors. We have also documented efficient viral second-strand DNA synthesis in hepatocytes from both TC-PTP-TG and FKBP52-KO mice. Thus, our data strongly support the contention that the viral second-strand DNA synthesis, rather than DNA strand-annealing, is the rate-limiting step in the efficient transduction of hepatocytes. This proposal will test the following hypotheses: 1. FKBP52 is phosphorylated at serine/threonine residues by DNA-PKcs, and dephosphorylated by PP5;2. Optimal transduction of primary hepatocytes is limited by serine/threonine phosphorylated forms of FKBP52, but can be overcome by deliberate overexpression of PP5;3. DNA-PKcs-deficient mice overexpressing TC-PTP allow efficient transduction of murine hepatocytes;and 4. Efficient integration of the AAV proviral genome occurs in primary hepatocytes in DNA-PKcs-deficient/ TC-PTP-transgenic mice in vivo. The knowledge gained from these studies will not only shed light on the AAV-hepatocyte interactions, but will also be applicable in further improvements in recombinant AAV vectors for their potential use in gene therapy of human liver diseases in general, and al-antitrypsin deficiency (AATD) and glycogen storage disease (GSD) in particular, the main focus of this PPG application.